Taking Tesla private would immediately end the Wall
Street debate about whether Tesla will raise additional public
equity capital in 2018 or 2019.

Seemingly innocuous comments can sometimes mean a lot.

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Elon Musk blew Wall Street's collective mind on Tuesday when
he
tweeted that he might take Tesla private, at $420 per share,
roughly a $70 premium on where the company has been trading in
the aftermath of second-quarter earnings.

Tesla didn't comment on whether the tweet from Musk's
verified account was legitimate, although Musk himself later
followed-up with some details. And predictably enough Twitter
leaped to the 4/20 pot-smoking references.

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Musk's tweet came on the heels of the Financial Times
reporting a $2-billion stake from the sovereign wealth fund of
Saudi Arabia.

A buyout would be a big bite - $420 a share yields a market
capitalization of over $70 billion for Tesla - but then again
Tesla board recently approved a pay package for Musk that
predicts a $650-billion market cap in ten years. The figure would
also reflect some of the more bullish price targets coming from
investment-bank analysts.

Wall Street might be reeling, but taking Tesla private has
clearly been on Musk's mind for a while. The most telling quote,
for the financial community, from Neil Strauss' Rolling Stone
profile last year had nothing to do with Musk's romantic life (he
asked Strauss for dating advice).

"I wish we could be private with Tesla," he told Strauss.
"It actually makes us less efficient to be a public
company."

The endless melodrama of Tesla and its money

source

Andy Kiersz/Business Insider

That inefficiency has been on vivid display for all of
2018, as Tesla's existence has been fought over by long-term
investors and short-sellers. Of late, the longs have been
winning. Shares were up over 15% before Musk touched Twitter on
Tuesday. (They shot up another 7% on the news, heading toward
last year's all-time highs, before trading was halted.)

Capital efficiency has been externally imposed on Tesla in
2018. The company laid off 9% of its workforce, submitted any
spending more than a million for Musk's approval, refused to sell
shares or debt to raise additional money, and cut its cash burn
in the second quarter.

But the next few years are likely to see increased capital
demands. The company needs another factory and the plan is to
build it in China. That could cost a billion or two.

Presumably, Tesla will fund some future expansion with
borrowing, as most traditional automakers do. But additional
investment funding from private sources would eliminate
considerable scrutiny and put an end to the longs vs. shorts
circus that has lately dominated the debate. Current investors
would be paid off nicely, and Tesla's possible profits and
predictable losses would no longer be a matter of public
record.

Musk has clearly been frustrated with Tesla's status as a
stock-market battleground. If he has the considerable funding in
place to declare victory and move on, the company might be with
us for a long time, indeed.

And just for the record, although Musk doesn't really
consider himself a businessman, if this happens, it would be the
deal of the century.